When a borrower or issuer finds itself in a distressed situation, management, shareholders and/or private equity sponsors will often identify specific assets that are of the greatest value and attempt to isolate those assets from the distressed company as a whole. Such assets may be specific items of intellectual property or specific lines of business. It is often in the best interests of management and the shareholders to extract as much cash or other value out of those assets as possible, either to improve the balance sheet (by reducing debt) or to take an equity distribution. However, this can often be to the detriment of a specific group of creditors. A number of transactions of this type have been in the news recently, most notably J. Crew Group Inc.'s (“JCrew”) transfer of trademark assets out of the group liable to its term loan lenders in an effort to use those assets to refinance earlier-maturing PIK Notes. In that situation, the lenders attempted to prevent the transaction, and JCrew argued that the transaction was permitted under the term loan covenants. JCrew vigorously defended its right to consummate the transaction and pro-actively sought declaratory relief from the courts confirming that the transaction was permissible.